Poking the dragon

Once, tyres meant trusted brands, glossy adverts, and stocked shelves. Now, with imports flooding in and legacies fading, the road ahead looks uncertain. JIM WARD asks if we really know what we’re driving on.

Anyone shopping for passenger-vehicle tyres recently will be familiar with this scenario: reputable dealers advise that the brand researched online is discontinued or unavailable, and there is no stock of the promotional specials for suitable tyres. Some alternatives exist, but finding a matching replacement is difficult – or depends on what arrives in the next container. Prices vary wildly, from over R7,000 to under R2,500 a tyre for the same size and rating, when comparing known versus unknown brands. Proper advice, test results, and reliable information have become scarce. We live in changing times.

Imported brands don’t maintain lavish head offices in major cities. They rely on tyre dealers to handle publicity and storage costs, while they do little or no marketing. An order is placed, a manufacturing deposit is paid, and only then does production begin. The era of large warehouses storing thousands of truck and passenger tyres has passed; even legacy brands no longer keep the extensive stock they once carried.

The focus should therefore shift to what goes into the cost of a tyre beyond the invoice price, because “cheap” imported tyres are not always cheap.

So why are Chinese/imported tyres so much cheaper than so-called legacy brands? The entire purchasing process has been radically altered; the change favours manufacturers, not importers:

• Overseas manufacturers reduce finance costs by avoiding stockholding. In fact, the buyer’s money is used to finance production once an order is placed.
• Tyres are exported immediately after production, avoiding any warehousing costs overseas. They are either in production or in transit – not warehoused.
• Tyres are sold without favourable payment terms; payment is due immediately on receipt of stock.
• Importers, local agents, and dealers incur warehousing charges and marketing costs. Their suppliers may have little or no technical or marketing presence in South Africa and no head offices with staff – they are, in effect, virtual partners.
• In some cases, reduced materials are used in manufacturing. Tyres may be lighter, with shallower treads or thinner/weaker plies. Among Tier 4 and 5 products, materials are often of a lower technical purity, or standard, than legacy brands. Still, it is in the first four points that the major cost savings lie.

While imported tyres may be cheaper upfront, limited local support and certain product-quality differences demand careful consideration.

Contrast this to how legacy brands previously handled sales:

• Tyres were manufactured and kept in stock, ready to meet demand – entirely at the manufacturer’s cost.
• Warehousing of tyres was at the brand’s expense.
• Dealers were offered favourable terms for holding stock, often paying on 90 days, enabling them to keep many sizes and types.
• Legacy brands handled advertising, funding costly marketing campaigns.

Think back to the white Opel Kadett GSi driven around the roof of a skyscraper; the Formula One branding; rallying, off-road racing, and the promotional presence of major tyre manufacturers across transport; film advertisements featuring earthmoving equipment and fleets; countless safety initiatives. These were costs the manufacturers absorbed. When last did you see a tyre advert on television?

Whilst high-quality components and manufacturing processes contributed to production costs, the factors above were major cost drivers weighing on the finished price – but at least the buyer knew what they were getting.

It would be unfair to frame the current situation as simply right or wrong. It has changed so dramatically that yesterday’s ordering process is almost unrecognisable. What was known and verifiable has morphed into the uncertain and difficult to verify. Importers can order a container of tyres and have sidewalls moulded with almost anything they request – including names and safety ratings – and can easily find a factory to produce them. That makes it extremely difficult for consumers to know exactly what they are buying; therein lies the true value of trusted guidance.

Experts who have worked in the industry for many years have built up priceless reserves of product knowledge. They have seen brands come and go; they know what works locally and what does not. They may no longer be trading under the famous red, yellow, or blue flags of the legacy brands many grew up with, but they still carry the knowledge – and they are best placed to guide customers through the minefield of unknown tyre brands in a rapidly changing world.

China’s GDP is roughly US$18.47 trillion – about 47 times larger than South Africa’s total economy. South Africa’s population accounts for about 4.57% of China’s. South Africa is firmly part of the world economy now, and dealing with the world’s second-largest economy and population is rather like poking a very powerful dragon with a stick.

Best, then, to talk to someone who knows the dragon.